Direct Loans

• Statutory Authority

  • U.S. Code, Title 20—Education Chapter 28—Higher Education Resources and Student Assistance Subchapter IV—Student Assistance > Part D—William D. Ford Federal Direct Loan Program §§ 1087a – 1087j [HEA §§ 451 - 460]

• Regulations

  • 34 CFR Part 685

• ED References

  • 2019-20 FSA Handbook, Vol. 1
  • 2019-20 FSA Handbook, Vol. 2
  • 2019-20 FSA Handbook, Vol. 3
  • 2019-20 FSA Handbook, Vol. 4

• NASFAA Publications and Articles

  • NASFAA AskRegs Knowledgebase

    Search or browse the Knowledgebase for answers to regulatory and compliance questions submitted by financial aid administrators.

  • NASFAA Compliance Engine

    The Compliance Engine is comprised of two modules: the Self-Evaluation Checklists which allows administrators to evaluate their programs in a centralized, shared online space, and the P&P Builder, a tool designed to assist institutions in the creation and maintenance of a policies and procedures manual. Along with an online space to update and maintain policies and procedures, the P&P Builder includes legislation and regulation associated with compliance with Title IV requirements.

  • NASFAA Quick Reference Guides
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    NASFAA U Authorized Events are a comprehensive set of instructional materials for teaching financial aid concepts to groups of individuals. Materials include a study guide, instructor guide and accompanying presentation slides.

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    NASFAA U Self-Study Guides are written for the independent learner. Each Self-Study Guide includes multiple lessons with a variety of exercises to reinforce each lesson.  Individuals do independent study and take quizzes in a traditional paper format (not online). Then you can qualify to take a test and earn a professional credential.

• Subtopics

  • Acceleration

    See Defaulted loans

  • Adverse credit

    See Borrower eligibility

  • Aggregate loan limits

    • Graduate/Professional

      • Direct Subsidized Loans

        • Limits

          • 685.203(d)(2)

        • Loss of subsidized eligibility on/after 7/1/12

          • GEN-11-16

        • Prior to 7/1/12

          • 685.203(a)(5)

      • Direct Unsubsidized Loans

        • 685.203(e)(3)

      • PLUS

        • 685.203(g)

    • NSLDS information

      • General

        • 2019-20 FSA Handbook, Vol. 3, Ch. 5

      • Calculating unsubsidized aggregate loan amounts

        • 2019-20 FSA Handbook, Vol. 3, Ch. 5

    • PLUS

      • 685.203(g)

    • Summary chart

      • 2019-20 FSA Handbook, Vol. 3, Ch. 5
      • NASFAA Student Aid Quick Reference Sheet – 2019-20

    • Treatment of consolidation loans

      • 685.203(i)
      • 2019-20 FSA Handbook, Vol. 3, Ch. 5

    • Treatment of converted TEACH Grants

      • 685.203(k)

    • Undergraduate

      • Direct Subsidized Loans

        • 685.203(d)(1)

      • Direct Unsubsidized Loans

        • Dependent undergraduate student

          • 685.203(e)(1)

        • Dependent student whose parent cannot borrow PLUS

          • 685.203(e)(2)
          • 2019-20 FSA Handbook, Vol. 3, Ch. 5

        • Independent undergraduate student

          • 685.203(e)(2)

  • Annual loan limits

    • Grade level progression

      • General information

        • 2019-20 FSA Handbook, Vol. 3, Ch. 5

      • Grade level changes during academic year

        • 2019-20 FSA Handbook, Vol. 3, Ch. 5

      • New annual amount for same grade level

        • 2019-20 FSA Handbook, Vol. 3, Ch. 5

      • Remedial work

        • 2019-20 FSA Handbook, Vol. 3, Ch. 5

      • Transfer student’s grade level classification

        • 2019-20 FSA Handbook, Vol. 3, Ch. 5

    • Graduate/Professional students

      • Direct Subsidized Loans

        • Limits

          • 685.203(d)(2)

        • Loss of subsidized eligibility on/after 7/1/12

          • GEN-11-16

        • Prior to 7/1/12

          • 685.203(a)(5)

      • Direct Unsubsidized Loans

        • 685.203(b)(2)(iii)
        • 685.203(c)(1)(i)
        • 685.203(c)(2)(v)

      • PLUS

        • 685.203(f)

    • Health professions students

      • 2019-20 FSA Handbook, Vol. 3, Ch. 5

    • Loan limit period (period to which loan limit applies)

      • 685.203(h)

    • Loan limit progression [Scheduled Academic Year (SAY) and Borrower Based Academic Year (BBAY)]

      • 685.303(e)
      • 2019-20 FSA Handbook, Vol. 3, Ch. 5

    • Maximum loan amount (need limitation)

      • 685.203(j)

    • PLUS

      • 685.203(f)

    • Preparatory coursework

      • Direct Subsidized Loans

        • 685.203(a)(6)

      • Direct Unsubsidized Loans

        • 685.203(c)(2)(vi)

    • Students returning for same or lower credential

      • 2019-20 FSA Handbook, Vol. 3, Ch. 5

    • Summary chart

      • 2019-20 FSA Handbook, Vol. 3, Ch. 5
      • NASFAA Student Aid Quick Reference Sheet – 2019-20

    • Teacher certification (postbaccalaureate)

      • Direct Subsidized Loans

        • 685.203(a)(7)

      • Direct Unsubsidized Loans

        • 685.203(c)(2)(vii)

    • Transfer student

      • 2019-20 FSA Handbook, Vol. 3, Ch. 5

    • Treatment of converted TEACH Grants

      • 685.203(k)

    • Undergraduate students

      • First year

        • Direct Subsidized Loans

          • 685.203(a)(1)
          • 685.203(a)(8)
          • 685.203(a)(9)(i)

        • Direct Unsubsidized Loans

          • Dependent student

            • 685.203(b)(1)

          • Dependent student whose parent cannot borrow PLUS

            • 685.203(c)(1)
            • 685.203(c)(2)(i)
            • 685.203(c)(2)(viii)
            • 685.203(c)(2)(ix)(A)
            • 685.203(c)(3)

          • Independent undergraduate student

            • 685.203(b)(2)
            • 685.203(c)(1)
            • 685.203(c)(2)(i)
            • 685.203(c)(2)(viii)
            • 685.203(c)(2)(ix)(A)

      • Second year

        • Direct Subsidized Loans

          • 685.203(a)(2)
          • 685.203(a)(9)(ii)

        • Direct Unsubsidized Loans

          • Dependent student

            • 685.203(b)(1)

          • Dependent student whose parent cannot borrow PLUS

            • 685.203(b)(2)
            • 685.203(c)(1)
            • 685.203(c)(2)(ii)
            • 685.203(c)(2)(ix)(B)
            • 685.203(c)(3)

          • Independent undergraduate student

            • 685.203(b)(2)
            • 685.203(c)(1)(i)
            • 685.203(c)(2)(ii)
            • 685.203(c)(2)(ix)(B)

      • Third year through end of undergraduate program (including upper division programs, i.e., programs requiring an associate or baccalaureate for admission)

        • Direct Subsidized Loans

          • 685.203(a)(3)
          • 685.203(a)(4)

        • Direct Unsubsidized Loans

          • Dependent student

            • 685.203(b)(1)

          • Dependent student whose parent cannot borrow PLUS

            • 685.203(c)(1)
            • 685.203(c)(2)(iii)
            • 685.203(c)(2)(iv)
            • 685.203(c)(3)

          • Independent undergraduate student

            • 685.203(b)(2)
            • 685.203(c)(1)(i)
            • 685.203(c)(2)(iii)
            • 685.203(c)(2)(iv)

  • Application of payments

    • Application of prepayments

      • 685.211(a)(3)

    • Application of refunds and returns of Title IV funds from schools

      • 685.211(c)

    • Order of application for scheduled payments

      • 685.211(a)(1)

    • Order of application under income-based repayment

      • 685.221(c)

    • Order of application under PAYE repayment

      • 685.209(a)(3)

    • Order of application under REPAYE repayment

      • 685.209(c)

    • Prepayment without penalty

      • 685.211(a)(2)

  • Attendance at multiple schools during same period

    • 2019-20 FSA Handbook, Vol. 3, Ch. 5

  • Authority to pay refund or return of funds to ED on behalf of borrower

    • 685.306

  • Borrower defenses against collection of a loan and school liability

    • 685.206(c)
    • Electronic Announcement, 3/15/19

  • Borrower eligibility

    • Parent borrower of PLUS loans

      • Adverse credit history

        • General rules

          • 685.200(c)(1)(vii)
          • Federal Register, 1/14/15, pp. 1848 to 1849
          • Federal Register, 10/23/14, pp. 63319 to 33321
          • Electronic Announcement, 1/27/15
          • 2019-20 FSA Handbook, Vol. 1, Ch. 6

        • Definition of endorser

          • 685.102(b)

      • Borrowing on behalf of an eligible dependent undergraduate student

        • 685.200(c)(2)

      • Citizenship/residency

        • 668.33
        • 685.200(c)(1)(iii)

      • Default on Title IV loans

        • General rules

          • 668.32(g)(1)
          • 685.200(c)(2)(iv)
          • 685.200(d)

        • Definition of satisfactory repayment arrangement

          • 685.102(b)

      • Disability cancellation of previous loan

        • 685.200(a)(1)(iv)
        • 685.200(c)(1)(vi)

      • Fraudulently obtained Title IV funds

        • 685.200(c)(2)(vii)

      • Overpayment of Title IV funds

        • 668.32(g)(4)
        • 685.200(c)(2)(iv)

      • Parent (definition and qualification to borrow)

        • 685.200(c)(2)
        • GEN-14-14
        • 2019-20 FSA Handbook, Vol. 1, Ch. 6

      • Social Security number

        • 685.200(c)(2)(ii)

      • Statement of Educational Purpose

        • 668.32(h)
        • 685.200(c)(2)(v)

    • Student borrower

      See top list entry for Student Eligibility

  • Code of conduct

    • 668.14(b)(27)
    • 2019-20 FSA Handbook, Vol. 2, Ch. 3

  • Collection charges

    • 685.202(e)
    • 685.211(d)(2)

  • Consolidation

    • General rules

      • 685.220

    • Interest rate

      • 685.202(a)(10)
      • 685.220(g)

    • Loans eligible for consolidation

      • 685.220(b)

  • Defaulted loans

    • Acceleration

      • 685.211(d)(1)

    • Collection actions

      • 685.211(d)(3)

    • Eligibility for deferment

      • 685.204(a)(3)

    • Failure to repay in response to immediate demand letter

      • 685.211(e)(3)

    • Satisfactory repayment arrangements

      • 685.102(b)

  • Deferment

    See also In-school status of student

    • Additional deferments for borrowers with loans made prior to 7/1/93

      • 682.210(b)
      • 685.204(j)

    • Borrower’s responsibility to request and document deferment

      • 685.204(a)(4)

    • Cancer Treatment

      • Electronic Announcement, 8/22/19

    • Economic hardship

      • 685.204(g)

    • Graduate fellowship

      • General rules

        • 685.204(d)

      • Medical internship or residency

        • 685.204(d)(2)(i)(C)

    • In-school deferment

      • General rules

        • 685.204(b)

      • Medical internship or residency

        • 685.204(b)(1)(ii)

      • Methods for identifying or conveying deferment status

        • 685.204(b)(2)

    • Military service

      See also Post active duty deferment

      • General rules

        • 685.204(h)

      • Borrower’s representative

        • 685.204(a)(4)(ii)
        • 685.204(h)(3)

      • National Guard

        • 685.204(h)(5)(ii)

    • Payment of interest during deferment of Direct Unsubsidized or PLUS loans

      • 685.204(a)(2)

    • Post active duty deferment

      • 685.204(i)
      • GEN-17-03

    • Rehabilitation training

      • 685.204(e)

    • Unemployment

      • 685.204(f)

  • Denial or reduction of Direct Loans

    See top list entry for Professional Judgment

  • Dependent student whose parents cannot borrow PLUS: qualifying circumstances

    See also Annual loan limits

    • 685.203(c)(1)(ii), (iii)
    • GEN-11-07
    • 2019-20 FSA Handbook, Vol. 3, Ch. 5

  • Determination of Direct Unsubsidized Loan eligibility for Grad PLUS applicants and notification of eligibility

    • 685.301(a)(3)

  • Disbursement

    See top list entries for Cash Management and Disbursement

  • Discharge, cancellation, forgiveness

    • Bankruptcy

      • 685.212(c)

    • Closed schools

      • 685.212(d)
      • 685.214
      • Electronic Announcement, 12/13/18

    • Death

      • 685.212(a)
      • 2019-20 FSA Handbook, Appendix C

    • Disposition of payments received after discharge approval

      • 685.212(g)

    • False certification and unauthorized disbursement

      • 685.212(e)
      • 685.215

    • Public Service Loan Forgiveness

      • 685.212(i)
      • 685.219

    • September 11 survivors discharge

      • 685.212(j)
      • 685.218

    • Teacher loan forgiveness

      • 685.212(h)
      • 685.217

    • Total and permanent disability (TPD)

      • 685.212(b)
      • 685.213
      • Electronic Announcement, 4/17/18
      • 2019-20 FSA Handbook, Vol. 1, Ch. 3
      • FSA TPD Resource Center webpage

      • Physician certification

        • 685.213(b)(2)
        • TPD Discharge form

    • Unpaid refunds

      • 685.212(f)
      • 685.216

  • Enrollment reporting

    • 685.309(b)
    • GEN-17-08
    • GEN-14-17
    • GEN-14-07
    • 2019-20 FSA Handbook, Vol. 2, Ch. 3
    • NSLDS Enrollment Reporting Guide (November 2019)

  • Entrance counseling

    See top list entry for Loan Counseling

  • Exit counseling

    See top list entry for Loan Counseling

  • FAFSA requirement

    • Subsidized and unsubsidized Direct Loans

      • 685.200(a)(1)

    • Grad PLUS

      • 685.200(b)(2)

    • Parent PLUS

      • GEN-11-07

  • Failure to begin attendance

    • GEN-13-02
    • 2019-20 FSA Handbook, Vol. 4, Ch. 3

  • Forbearance

    • General conditions and process

      • 685.205(a)

    • Administrative

      • 685.205(b)

    • Length of forbearance period

      • 685.205(c)

  • Grace period

    • Active duty military exclusion

      • 685.207(b)(2)(ii)
      • 685.207(c)(2)(ii)

    • Correspondence programs

      • 685.207(f)

    • Definition

      • 685.102(b)

    • Grad PLUS

      • 685.204(c)(1)

    • Parent PLUS

      • 685.204(c)(2)(ii)

    • Subsidized loan

      • 685.207(b)(2)

  • Ineligible borrower (due to borrower or student action)

    • General rules

      • 685.211(e)

    • Immediate demand letter

      • 685.211(e)(2)

  • In-school status of student

    • Parent PLUS

      • 685.204(c)(2)(i)

    • Subsidized loan

      • 685.207(b)(1)

    • Unsubsidized loan

      • 685.207(c)(1)

  • Interest capitalization

    • 685.202(b)

  • Interest rate

    • As calculated

      • 2020-21

        • Electronic Announcement, 5/15/20

      • 2019-20

        • Electronic Announcement, 5/23/19

    • Formulas used to calculate

      • 7/1/2013 and later, Undergraduate Direct Subsidized and Unsubsidized Loans

        • 685.202(a)(7)
        • Electronic Announcement, 8/9/13, Attachment

      • 7/1/2013 and later, Grad/professional Direct Unsubsidized Loans

        • 685.202(a)(8)
        • Electronic Announcement, 8/9/13, Attachment

      • 7/1/2006 – 6/30/2013, Undergraduate Direct Subsidized Loans

        • 685.202(a)(4)

      • 7/1/2006 – 6/30/2013, Direct Unsubsidized Loans

        • 685.202(a)(6)

      • 7/1/2006 – 6/30/2012, Grad/professional Direct Subsidized Loans

        • 685.202(a)(5)

      • 7/1/1998 – 6/30/2006, Direct Subsidized and Direct Unsubsidized Loans

        • 685.202(a)(3)

      • Consolidation loans

        • 685.202(a)(10)
        • Electronic Announcement, 8/9/13, Attachment

      • PLUS Loans

        • 685.202(a)(9)

    • Servicemembers Civil Relief Act (SCRA)

      • 685.202(a)(11)
      • GEN-16-08
      • Electronic Announcement, 1/10/20
      • U.S. Department of Justice website

  • Late charge

    • 685.202(d)

  • Loan fees

    • 685.202(c)
    • 685.301(a)(9)
    • GEN-16-11
    • Electronic Announcement, 5/30/19
    • Electronic Announcement, 6/6/18

  • Loan period

    • COD Reporting

      • GEN-13-13
      • Electronic Announcement, 5/13/16
      • Electronic Announcement, 4/20/15
      • Electronic Announcement, 11/21/14

    • Maximum loan period

      • 685.301(a)(10)(iv)
      • 2019-20 FSA Handbook, Vol. 3, Ch. 5

    • Minimum loan period

      • 685.301(a)(10)(i)
      • 2019-20 FSA Handbook, Vol. 3, Ch. 5

    • New program

      • 685.301(a)(10)(iii)

    • Transfer student

      • 685.301(a)(10)(ii)
      • 2019-20 FSA Handbook, Vol. 3, Ch. 3

  • Minimum Direct Subsidized Loan amount

    • 685.301(a)(7)

  • Origination rules, general

    See Professional Judgment

    • 685.301

    • COD origination fee guidance

      • Electronic Announcement, 5/30/19

    • Refusal to originate

      • 685.301(a)(8)(i),(ii)
      • 2019-20 FSA Handbook, Vol. 3, Ch. 5

  • Program participation choices for school

    • GEN-11-07

  • Program year closeout

    See Cash Management

  • Promissory note

    • Annual Student Loan Acknowledgement

      • Electronic Announcement, 4/21/20
      • Electronic Announcement, 3/27/20
      • Electronic Announcement, 11/21/19

    • Completion prior to disbursement

      • 685.303(b)(1)

    • Handling

      • 685.301(b)

    • Master Promissory Note (Revised)

      • Electronic Announcement, 4/24/20

  • Proration of loans for remaining periods and programs of less than an academic year in length

    • Prorated limits

      See also Annual Loan Limits for Undergraduate students

      • 2019-20 FSA Handbook, Vol. 3, Ch. 5

    • Recalculation for change in credits

      • 685.301(a)(5)(ii)

  • Reconciliation

    • 685.300(b)(5)
    • Electronic Announcement, 12/17/19
    • Electronic Announcement, 11/19/19
    • Electronic Announcement, 12/21/17
    • Electronic Announcement, 12/17/15

  • Rehabilitation of defaulted loans

    • 685.211(f)

  • Repayment incentive

    • 685.211(b)

  • Repayment period, beginning of

    See also Repayment plans

    • Consolidation loan

      • 685.207(e)

    • Exclusion of deferments and forbearances from repayment period

      • 685.208(a)(5)

    • First payment due date

      • 685.207(a)(3)

    • PLUS loan

      • 685.207(d)

    • Subsidized loan

      • 685.207(b)(4)

    • Unsubsidized loan

      • 685.207(c)(4)

  • Repayment plans

    • Alternative repayment plan

      • 685.208(l)

    • Applicability of selected plan to all Direct Loans of borrower

      • 685.208(a)(4)

    • Changing repayment plans

      • 685.210(b)

    • Choice of plan

      • 685.210

    • Defaulted loans

      • 685.211(d)(3)(ii)

    • Extended repayment plan

      • 685.208(d)-(e)
      • 685.208(i)

    • Graduated repayment plan

      • 685.208(f)-(j)

    • Income-based repayment plan

      • General rules

        • 685.221

      • Eligibility documentation, verification, and notifications

        • 685.221(e)
        • Federal Register, 9/29/17, pp. 45465 to 45471

      • Interest forgiveness

        • 685.221(b)(3)

      • Loan forgiveness after designated years of repayment

        • 685.221(f)

      • Monthly payment limit

        • 685.221(b)(1)

      • Partial financial hardship

        • 685.221(a)(5)

    • Income-contingent repayment plan

      • General rules

        • 685.209(b)

      • Eligibility documentation

        • 685.209(b)(3)(i)
        • 685.209(b)(3)(vi)
        • Federal Register, 9/29/17, pp. 45465 to 45471

      • Interest capitalization limitation

        • 685.209(b)(3)(iv)

      • Loan forgiveness after designated years of repayment

        • 685.209(b)(3)(iii)(D)

      • Monthly repayment

        • 685.208(k)

      • Repayment amount calculation

        • 685.209(b)(1)

      • Repayment period

        • 685.209(b)(3)(iii)

    • Minimum payment of accrued interest

      • 685.208(a)(2)(v)
      • 685.208(f)(3)

    • Pay as you earn (PAYE) repayment plan

      • General rules

        • 685.209(a)

      • Eligibility documentation, verification, and notifications

        • 685.209(a)(5)
        • Federal Register, 9/29/17, pp. 45465 to 45471

      • Interest forgiveness

        • 685.209(a)(2)(iii)

      • Loan forgiveness after designated years of repayment

        • 685.209(a)(6)

      • Monthly payment limit

        • 685.209(a)(2)(i)

      • Partial financial hardship

        • 685.209(a)(1)(v)

      • Repayment period

        • 685.209(a)(2)(vi)

    • Plans available to Direct Subsidized or Unsubsidized Loan borrowers who enter repayment before 7/1/2006

      • 685.208(a)(1)(i)

    • Plans available to Direct PLUS borrowers who enter repayment before 7/1/2006

      • 685.208(a)(1)(ii)

    • Plans available to Direct Subsidized, Unsubsidized, or Grad PLUS borrowers who enter repayment on or after 7/1/2006

      • 685.208(a)(2)(i)

    • Plans available to parent PLUS borrowers who enter repayment on or after 7/1/2006

      • 685.208(a)(2)(ii)

    • Plans available to Direct Consolidation Loan borrowers who enter repayment on or after 7/1/2006

      • 685.208(a)(2)(iii), (iv)

    • Revised Pay As You Earn (REPAYE) repayment plan

      • General rules

        • 685.209(c)

      • Eligibility documentation, verification, and notifications

        • 685.209(c)(4)
        • Federal Register, 9/29/17, pp. 45465 to 45471
        • Electronic Announcement, 12/17/15

      • Interest forgiveness

        • 685.209(c)(2)(iii)

      • Loan forgiveness after designated years of repayment

        • 685.209(c)(5)

      • Monthly payment limit

        • 685.209(c)(2)

      • Repayment period

        • 685.209(c)(2)(ii)

    • Spousal information for income-based, income-contingent, and pay as you earn plans

      • GEN-14-14

    • Standard repayment plan

      • 685.208(b), (c)
      • 685.208(j)

  • Replacement of EFC with loan proceeds

    • 685.200(e)

  • Replacement of subsidized loan with unsubsidized loan

    • 2019-20 FSA Handbook, Vol. 4, Ch. 3

  • Subsidy

    • Counseling information

      • 685.304(a)(6)(xiii)(C)
      • 685.304(b)(4)(xii)(C)(2)

    • Limitation on eligibility for subsidy (150% limit)

      • 685.200(f)
      • Federal Register, 1/17/14, Preamble to the Final Rule
      • 150% Direct Subsidized Loan Limit: Electronic Announcement, #20
      • 150% Direct Subsidized Loan Limit: Electronic Announcement #11
      • 150% Direct Subsidized Loan Limit - Frequently Asked Questions
      • 2019-20 FSA Handbook, Vol. 3, Ch. 5

    • Periods subsidized

      • 685.100(a)(1)
      • 685.102(b), Federal Direct Consolidation Loan Program (2)
      • 685.102(b), Federal Direct Stafford/Ford Loan Program
      • 685.207(b)(3)
      • 685.207(c)(3)

    • Reporting

      • Electronic Announcement, 4/20/17
      • 150% Direct Subsidized Loan Limit: Electronic Announcement #22
      • 150% Direct Subsidized Loan Limit: Electronic Announcement, #19

  • Unenforceable loans due to school action

    • 685.308

  • Withdrawal date

    • 685.305